Moody's restores Ireland to investment grade on back of bailout exit

A sign for Moody's rating agency is displayed at the company headquarters in New York (AFP Photo/Emmanuel Dunand) / AFP

Moody’s Investors Service has upgraded Ireland’s government debt rating to investment grade based on the one-time Celtic Tiger’s growth potential and Dublin’s timely exit from its EU/IMF support program.

The New York-based credit rating agency elevated Ireland from
“junk” status to Baa3 – the lowest investment grade, a statement
released Friday read.

Prior to the financial crisis, Ireland held a “triple A” rating,
signifying the highest quality and lowest credit risk. The
country is now regarded as a lower risk investment by the big
three credit rating agencies for the first time since 2011.

Moody’s said the two main drivers for the upgrade were “the
growth potential of the Irish economy” and the Irish government's
exit from its three-year economic adjustment program in
mid-December 2013.

Moody's noted that Ireland’s “on-schedule” exit from the
International Monetary Fund/European Union support program on
December 15 “without a precautionary credit line reflects that
the government's reform agenda stayed largely on track throughout
the program, despite weaker than expected domestic and external
economic conditions.”

Finance Minister Michael Noonan said the move will help to lower
borrowing costs for companies and individuals alike.

“The decision by Moody’s to upgrade Ireland’s credit rating
reflects the significant progress that has been made in
stabilizing the public finances, restructuring the banking sector
and, most importantly, growing the economy and creating
jobs,” Noonan said.

Moody’s also changed the outlook for Ireland’s credit rating from
stable to positive, noting expectations of a “sustained
recovery of the Irish economy” on top of signs that stronger
growth will be forthcoming in the rest of Europe “and are
increasingly well-entrenched in the US.”

It further upgraded the debt ratings of the National Asset
Management Agency to investment grade and its outlook to
positive. The agency, whose debt is backstopped by the
government, was created in 2009 to tackle the Irish financial
crisis and the deflation of the Irish property bubble.

Ireland’s sovereign debt upgrade comes amidst falling
unemployment figures and lenders slashing the interest charged on
the national debt to 3.5 percent – lower than the cost of loans
under the bailout and less than was paid before the debt crisis,
according to the Irish Independent.

The only bad news in Moody’s otherwise shiny prognosis regarded
sluggish pace for the country’s reform of its banking system. The
Irish Central Bank’s drive for banks to ratchet up collection
efforts on mortgage and small and medium sized business loans
arrears is at present “likely to increase foreclosures,
impairing profitability and potentially dampening the housing
market recovery.”